International coffee prices have recently hit their lowest levels for 12 years, and according to representatives of coffee producers in Colombia and Brazil are now below production costs. These declining prices are having a devastating impact on the 25 million coffee families worldwide and on the landscapes they help to manage and depend on.
At the Rainforest Alliance we believe the key to a sustainable and healthy coffee sector is ensuring that producers – large or small – are economically viable businesses. For smallholders this can be the difference between being able to earn a decent living or being stuck in a cycle of poverty. For larger farms it can be the difference between paying workers a living wage or not. For all producers’ lack of economic viability means they will not be able to invest in sustainable practices, adapt to climatic changes or take steps to respect child or worker rights.
The causes of the current price drop are complex and include issues on how supply is managed, poorly designed agricultural policies, and insufficient support for farmers and farm management. Speculation in the coffee futures market may also be a factor, exacerbating price swings. Yet whilst the current pricing crisis is particularly dire, fluctuating prices are a trait of any commodity and the long-term sustainability of producers will only be possible if it can be achieved within the current market system they rely on.
However as the recent dramatic price falls have demonstrated, the market is not an equal playing field. Producers carry a disproportionate amount of risk, and often lack the knowledge and access to tools that are designed to deal with these risks. This is compounded by being impacted more quickly and more dramatically when the market price fluctuates. Price volatility often means producers are unable to commit long term investments needed to implement sustainable agricultural practices. At the same time they cannot easily exit the coffee market and move into other forms of income generation.
It is therefore vital that all actors in the supply chain commit to a long term and systemic response in order not only to improve prices but also to allow producers to build their resilience to fluctuating markets and increase their productivity (profitability through more efficient farming practices).
We call on the coffee sector to start taking action today to ensure that the coffee we all enjoy is not being produced at the detriment of producer’s livelihoods. We believe traders, roasters and retailers must adjust the way they do business.
Roasters and buyers must change their procurement practices to ensure that producers receive decent payment for their crop within a timely manner. Payment terms that can be as long as 200 days mean producers are unable to plan ahead, invest sustainably or save for when prices drop. This is exploitative, outdated and unfair and should stop. In addition, committing to long term relationships with producers would help producers to plan ahead and create a more equal relationship between supply chain actors as trust and knowledge is built. A long term purchasing contract would also allow for a clause referring to a minimum price connected to the production cost for the specific situation of the producers.
Governments and companies should increase their investments in the sustainability of the producers. Producers need more support from their governments in order to become sustainable, for example through better implementation of good agricultural practices, access to inputs and finance, increasing their resilience through diversifying their income sources.
At Rainforest Alliance we are committed to continuing to work with producers and the entire supply chain towards a more sustainable coffee sector. We work on fairer distribution throughout the value chain and strengthening the producer’s position in order for them to be able to advocate for the support and policies that will allow them to become sustainable. Meanwhile we continue to appeal to the industry to favor certified sustainable coffee over conventionally produced coffee in order to support producers and help create a sustainable sector.